Greater New Orleans

Attorneys wait for the U.S. 5th Circuit Court of Appeals in New Orleans to open Monday morning. A 3-judge panel of the appeals court is considering whether to throw out a multi-billion-dollar settlement of private claims against BP involving the 2010 Deepwater Horizon accident and oil spill.
(Mark Schleifstein, NOLA.com | The Times-Picayune)

In arguments before a three-judge 5th Circuit panel, attorney Theodore Olson said the company believed the settlement it signed was in compliance with Rule 23, a federal court rule governing class action lawsuit settlements. But Olson said the implementation of the settlement under rules approved by U.S. District Court Carl Barbier resulted in a violation of that rule, because businesses didn't have to prove their losses were directly caused by the spill.

"If it isn't resolved so those terms aren't clearly in agreement, we'll be back here" appealing the payments before the 5th Circuit, said Olson, who served as U.S. Solicitor General from 2001 to 2004 during the administration of President George W. Bush.

The case before the 5th Circuit actually involves several groups of individuals and businesses in Texas and Florida and in other Gulf states that contend the original settlement agreement improperly excluded their claims.

In some cases, the agreement rules allowed claimants in Cameron Parish in southwestern Louisiana to be paid with little questioning, while claimants on Texas' Bolivar Peninsula, just across the state line, were required to provide additional proof that often resulted in their claims being denied, attorneys representing them said in motions filed prior to Monday's court session.

BP jumped into the appeal several months ago, after it lost appeals of rules governing "Business Economic Loss" claims before Barbier. BP had originally estimated the settlement would cost $7.8 billion, but early this year warned its estimate had risen to $8.4 billion and threatened to climb much higher.

According to BP, rules in the settlement allowed some businesses and individuals to be paid for losses that might not be directly caused by the accident or spill. Barbier had ruled that the agreement recognized that in some cases, it made sense to assume that losses were caused by the spill, such as with businesses directly on the coast in areas known to be oiled. The complicated accounting processes that BP preferred would be more expensive and time-consuming and would result in little difference in the ultimate payments, attorneys for the Plaintiffs Steering Committee had argued.

But BP also had appealed Barbier's ruling on the business class losses directly to the 5th Circuit, and on Oct. 2, a different three-judge panel ordered Barbier to reconsider the rules.

Barbier is in the midst of doing just that, and court-appointed claims adjuster Patrick Juneau last week proposed new interim rules that he believes complies with that 5th Circuit decision. Juneau is expected to submit permanent rules to Barbier by Dec. 2.

In a quarterly report last Tuesday, BP said it has readjusted its claims cost estimate to $9.2 billion, but continued to warn about the uncertainty remaining in how the business rules would be rewritten.

"Pending implementation of the Fifth Circuit's directions, there is now significant uncertainty as to the amount of BEL claims which have been processed but not yet paid and that will be determined to be payable in the future," said a news release announcing the 3rd quarter results. "BP has therefore derecognised the provision that had been made for these claims."

The release said the company has either paid or "assigned" $19.3 billion of a $20 billion trust fund it set up to pay for court-related expenses, and its total costs related to the spill have now reached $42.5 billion.

Several judges on Monday's 5th Circuit panel questioned BP's strategy in raising questions about the business class claims issues in this appeal, when it had already been ruled on - in BP's favor - by the other 5th Circuit panel.

Judge James Dennis of New Orleans, a Bill Clinton appointee who served on the other appeals panel and wrote a separate opinion largely disagreeing with that ruling, pointed out Monday that BP agreed to the written formula in the settlement on which the claims office business loss rules were based.

"I don't understand the turnaround," Dennis said.

Olson replied that the company continues to believe that what it agreed to was paying only claims that can be shown to be related to the spill.

Judge W. Eugene Davis of Lafayette, who was appointed by President Ronald Reagan, pointed out that BP also allowed the claims process to proceed for several months before raising the objections.

"I don't understand how you could come in after all that and say you didn't know what's going on," Davis said.

But Olson said the company did object during the early days of the court-appointed settlement process, and urged this 5th Circuit panel to hold off on its own ruling until it's clear that Barbier approves rules that comply with the ruling of the other panel.